Hewlett Packard Co., the worldâ€™s second largest computer maker, announced on Tuesday it had signed an agreement to purchase business software company Mercury Interactive.
The deal was valued at $4.5 billion or $52 per share, which represented a 33 percent premium on Mercuryâ€™s Tuesday closing price. The agreement could help increase the sales of HP OpenView IT management software due to a synergy effect with Mercuryâ€™s application development software.
HP said in a statement that the combination would provide the â€œindustry's most robust suite for optimizing, automating and aligning IT services with business needs.â€
The Mercury acquisition was expected to increase the size of the HP Software business to more than $2 billion in annual revenue. The agreement goes into effect immediately. Both companies' sales forces would begin reference-selling each others' products.
Revenue growth following the merger on a non-GAAP basis was expected to be from approximately 10 to 15 percent and boost the companyâ€™s operating margin by approximately 20 percent in fiscal year 2008.
â€œTogether, HP and Mercury instantly becomes the industryâ€™s premier provider of business technology optimization (BTO) software,â€ Mercury Chief Executive Officer and President Tony Zingale said. â€œA deal of this magnitude creates significant opportunities for our customers, our shareholders, our people and our partners.â€
Mercury has recently experienced several uneven months. The California-based company was one of the first to become entangled in a backdating scandal. It had to fire its CEO, Amnon Landan, and several top managers for improper use of stock options to benefit themselves.
After the company was investigated, it failed to submit its annual report on time and was delisted from the NASDAQ. In early July, its profit of $525 million was wiped out because it was used to rectify problems from the stock options issue.